The California State University system should be lauded for its efforts to protect students from financial aid predators. In light of student loan scandals at the national level, CSU is stiffening regulations on student loan policies, according to a report on the CSU website.
Universities should help ensure students aren’t in hock up to their B.A.s when they graduate. This is especially true when a college gives the appearance of recommending specific loan sharks.
The directive, titled “CSU Adopts Additional Safeguards for Student Loan Programs,” aims to surpass federal rules on how lender lists are presented to students. Many institutions supply short “preferred lender lists,” creating an assumption that the companies at the top of the list offer the best available deal to students.
Recent allegations of dubious financial aid scams have hit prestigious academic institutions like Columbia and USC. Some of the charges they face include conflicts of interest, receiving kickbacks and consumer fraud.
Columbia’s financial aid leader allegedly raked in $100,000 by selling stock options given to him by the university’s preferred lender, according to various news reports. The dean supposedly took payola in exchange for steering students to his coveted loan program. In fact, the loan company included the dean’s photo and glowing testimonial on its homepage.
The fraud accusations against Columbia are not an Ivy League anomaly. Similar sins are being investigated at the University of Texas, Johns Hopkins University, USC and hundreds of other colleges and universities.
It’s important that the CSU take a proactive stance with loan companies and financial aid employees. According to the report, more than half of the “$1.7 billion in student aid funding on CSU’s campuses” during the 2005-06 academic year was generated from student loans.
The document reasserts existing policy, which bans employees from soliciting any type of perks or benefits from potential lenders. Financial aid reps may not pocket money, reimbursements or gifts. The established rules state that even accepting food or refreshments at loan agency-sponsored events is a no-no.
To thwart the temptation to highlight favorite companies, future lender lists will be required to be randomly arranged. The newly muscled-up CSU policy calls for financial aid officers to be more transparent with lender fees and rates. Financial aid offices must provide multiple venues for accessing loan information.
The “safeguards” the CSU announced are mildly reassuring. For instance, the Project on Student Debt, a non-profit think tank, estimates the 2005 national student-loan debt incurred at 4-year public universities to be more than $19,000. CSU’s estimates are far below the national average, with approximately $14,000 in student indebtedness attributed to loans.
After New York’s attorney general subpoenaed Columbia officials, the university “settled” by paying more than $1 million in hush money. Since the settlement apparently squashed that part of the investigation, it’s impossible to calculate the long-range financial damage done to the victims.
As other educational systems attempt to survive federal investigations, we can feel secure that the CSU is watching our backs (and our wallets) with beefier measures. While Congress considers stricter rules to protect students from seedy loan companies, we applaud CSU’s steroidal approach in its frontline effort.
The best offense often is a good defense.
